Pricilla formed a corporation and owns all of the stock.She contributed property with a FMV of $60,000 and a basis of $55,000 and she received $10,000 cash from the corporation.Pricilla's taxable gain is:

Question

Quizplus · Accepted Answer

When Pricilla contributed the property to the corporation, the corporation issued her stock and gave her cash in exchange for the property. This is considered a taxable event and Pricilla must recognize a gain on the difference between the fair market value of the property contributed ($60,000) and her basis in the property ($55,000), which is $5,000. Therefore, the taxable gain is $5,000.

Pricilla Formed a Corporation and Owns All of the Stock